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TMI Blog1973 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... Reforms Act is liable for inclusion in the total wealth of the assessee ? The assessee was the former Maharajadhiraja of Darbhanga. The matter relates to the assessment year 1957-58, the relevant valuation date for which was March 31, 1957. The assessee filed a return on April 22, 1958, declaring a net wealth of Rs. 2,77,46,489. A revised return was filed subsequently showing the total wealth to be Rs. 2,69,58,130. The Wealth-tax officer determined the net wealth of the assessee to be Rs. 4,57,85,996. The assessee held shares and stocks in various limited companies. In the return filed by him the assessee gave correct valuation of those shares and stocks as given in the stock exchange quotations and the quotations furnished by well-known brokers, but he claimed a deduction of a sum of Rs. 2,30,546 by way of brokerage. It was contended on behalf of the assessee that in effecting the sales of the shares and stocks, brokerage would have to be paid. The Wealth-tax Officer disallowed the claim in this respect on the ground that there was no provision for deducting the brokerage commission. In Part IV of the return filed by the assessee, be mentioned the value of jewellery intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his connection that the value was generally estimated at 65 per cent. of the amount of compensation determined by the Compensation Officer. It was accordingly held that the valuation of the bonds should be determined to be 65 per cent. of the face value The questions reproduced above were thereafter referred to the High Court at the instance of the assessee. The High Court, while dealing with the first question, observed that in estimating the value of an asset, regard must be had to the value it would fetch. The word "fetch", in the opinion of the High Court, must mean the quoted price only and brokerage and other inevitable expenses would have to be ignored. On question No. (2), the High Court expressed the opinion that the jewellery was outside the scope of clause (viii) of section 5(1) of the Act and could be dealt with only under clause (xv). As regards question No. (3), the High Court relied upon its earlier decision in the case of Maharajkumar Kamal Singh v. Commissioner of Wealth-tax. It was observed that merely because the amount of compensation payable to the assessee had not yet been paid and there was likely to be much delay in paying the same, the said amount could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by clause (xv) and not by clause (viii) of section 5(1) of the Act. The claim of the assessee that the jewellery in question was intended for the personal use of the assessee was not rejected. No plea was also raised in appeal before the Appellate Assistant Commissioner or the Tribunal that the jewellery was not intended for the personal use of the assessee. It, therefore, cannot be said on the record that the claim of the assessee that the jewellery in question was intended for his personal use has been controverted. In the circumstances, we must proceed on the assumption for the purpose of the assessment during the relevant year that the jewellery was intended for the personal use of the assessee. It may be mentioned that jewellery has been excluded by section 32 of the Finance (No. 2) Act of 1971 (32 of 1971) from the purview of clause (viii) of section 5(1) of the Act with effect from April 1, 1963. This amendment made in clause (viii) would not make any material difference because the said amendment is to operate with effect from, April 1, 1963, while we are dealing with the assessment year 1957-58. As such, the said amendment can obviously not apply to the assessment in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permits any deduction on account of the expenses of sale which may be borne by the assessee if he were to sell the asset in question in the open market. The value according to section 7(1) has to be the price which the asset would fetch if sold in the open market. In a good many cases, the amount which the vendor would receive would be less than the price fetched by the asset. The vendor may, for example, have to pay for the brokerage commission or may have to incur other expenses for effectuating the sale. It is not, however, the amount which the vendor would receive after deduction of those expenses but the price which the asset would fetch when sold in the open market as would constitute the value of the asset for the purpose of section 7(1) of the Act. To accede to the contention advanced on behalf of the appellant would be reading in section 7(1) the words "to the assessee" after the words "it would fetch", although the legislature has not inserted those words in the statute. Such a course would not be permissible unless there is anything in the relevant provisions which may show that the intention of the legislature was that the value of an asset would be the price fetched a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an asset shows that in computing the value of an asset, such expenses cannot be deducted from the price which the asset would fetch if sold in the open market. Section 36(1) of the Estate Duty Act was based upon section 7(5) of U. K. Finance Act, 1894, and section 60(2) of the U. K. Finance Act, 1910, while section 48 of the Estate Duty Act was based upon section 7(3) of the U. K. Finance Act, 1894. According to section 7(5) of the U. K. Finance Act, 1894 : "The principal value of any property shall be estimated to be the price which, in the opinion of the Commissioners, such property would fetch if sold in the open market at the time of the death of the deceased. Section 60(2) of the U. K. Finance Act, 1910, provides that : "In estimating the principal value of any property under section 7(5) of the principal Act,.... the Commissioners shall fix the price of the property according to the market price at the time of the death of the deceased, and shall not make any redaction in the estimate on account of the estimate being made on the assumption that the whole property is to be placed on the market at one and the same time." In the context of the above provisions, it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion. It is argued in the first instance that compensation payable to the assessee under the Bihar Land Reforms Act does not constitute an asset as can be taken into account in computing the total wealth of the assessee. In the alternative, it is urged that in computing the value of compensation the Tribunal should have taken the value to be 50 per cent. and not 65 per cent. of the amount of compensation. None of these contentions, in our opinion, is well-founded. The Bihar Land Reforms Act, 1950 (Bihar Act 3 of 1950), provides for the transference to the State of the interest of proprietors and tenure-holders in land and of other interests in land. According to section 3(1) of the Act, the State Government may, from time to time, by notification declare that the estates or tenures of a proprietor or tenure-holder, specified in the notification, have passed to and become vested in the State. Section 4 enumerates the consequences of the vesting of an estate or tenure in the State. One of those consequences is that the estate or tenure, including the interest of the proprietor or tenure-holder in such an estate or tenure shall, with effect from the date of vesting, vest absolutely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, in our opinion, was vested with a right to get compensation immediately his land was vested in the State. Section 2(e) of the Act defines "assets" to include property of every description, movable or immovable, but does not include certain categories of property with which we are not concerned. The word "property", as mentioned by this court in the case of Ahmed G. H. Ariff v. Commissioner of Wealth-tax is a term of the widest import and, subject to any limitation which the context may require, it signifies every possible interest which a person can clearly hold and enjoy. The definition of the "assets" as given in section 2(e) of the Act, though not exhaustive, shows its wide amplitude and we see no reason as to why the right to receive compensation cannot be included amongst the assets of an assessee. According to Mr. Kolah, the amount of compensation had not been determined by the valuation date and as such it could not be included in the assets of the assessee. There is, however, no material on the record to show that the amount of compensation had not been determined by the valuation date. The fact that the assessee had originally shown the amount of compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance of the provisions of the Bihar Land Reforms Act. As the estate of the assessee which vested in the State was known and as the formula fixing the amount of compensation was prescribed by the statute, the amount of compensation was to all intents and purposes a matter of calculation. The fact that the necessary calculation had not been made and the amount of compensation had consequently not been qualified by the valuation date would not take compensation payable to the assessee out of the definition of assets or make it cease to be property. The right to receive compensation from the State is a valuable right, more so when it is based upon statute and the liability to pay is not denied by the State. It is no doubt true that the compensation is not payable immediately and its payment might be spread over a period of 40 years, but that fact would be relevant only for the purpose of evaluating the right to compensation. It would not detract from the proposition that the right to receive compensation, even though the date of payment is deferred, is property and constitutes asset for the purpose of the Wealth-tax Act. The Patna High Court in the case of Maharajkumar Kamal Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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